Thursday, March 12, 2015

Uncertain Health in an Insecure World – 27

“Innovation Concentration”

No one country has innovation cornered. But the concentrated creation of innovative companies that is California’s Silicon Valley is undeniable.

The Valley’s famous “fail fast” mantra isn’t an American philosophy as much as it’s a global call-to-action for tech and biotech entrepreneurs. It is peer group permission, Hell encouragement, to fail early in the pursuit of the remote possibility of making the world a faster, better, healthier or safer place.

Just what is it that makes the San Francisco Bay area so special? After spending a week in the midst of truly innovative people and companies (i.e., Hewlett Packard, Parc Xerox, Johnson & Johnson, Google, etc.), I’m in awe of the raw power and belief system underpinning Palo Alto’s commercialization engine.
The factors that make real innovation possible – the secret sauce of big new ideas and the willingness to take financial risks – exist to varying degrees all around the world.

But in the face of such opportunities, there are also stakes and payoffs so high that entire countries make pilgrimages to California to catch a mutated version of the innovation virus, only to return without the potent vaccine that makes success possible at home.

Call them (us) innovation touristas!

Not unlike start-ups that live or die on the cross of commercializing an idea, these foreigners abroad seek instant Googliness. To accelerate national innovation, they may even try market entry via “growth hackers” that paint a veneer on unfinished thoughts – intellectual properties – which remain to be thoroughly de-risked.  But a flashy website featuring a prototype does not impress Silicon Valley stalwarts, who are faced daily with moving human assets and capital away from already successful production lines to innovations, substituting proven success for business risk.

Many countries would like to have this problem.

But few countries, even ones with a strong scientific communities and select commercial successes, can afford this bold Wild West play.

So there’s the rub.

True innovation requires corporate band width and smart venture capital. It requires the capacity to quickly scale-up in the face of sudden demand. And while The Cloud and teraflop computing speeds are ubiquitous in most developed-world countries, there is still something missing.
The missing element is the highly qualified people and teams that exist in such abundance that they can power the innovation grid. INSEAD’s 2014 Innovation Index (II) calls this element the ‘Human Factor’ of innovation.  In the INSEAD 81-point measure of 140 countries, the global top-5 are Switzerland, U.K., Sweden, Finland, the Netherlands, and then the U.S.A. at #6! Regional leaders in their respective geographic zones are India, the U.S.A., Barbados, Singapore, Israel, Switzerland and, yes, Mauritius for sub-Saharan Africa.

So, the point of this isn’t about being exclusionary. It’s about realism.

Every country on Earth can enter the Olympics, but most of the gold, silver & bronze medals go to those with the best talent pool and the most proficient system for promulgating success. The 2012 London Olympics medal count for Mauritius was zero (0). The World Bank’s 2014 measure of Mauritius’ GDP per capita was a middling US$9,202. 
Countries pursuing the brass ring of fostering an innovation ecosystem are aspirational, and that’s all good! But when countries divert national attention and treasure to creating such capabilities without attending to the economic security and wellness of their people, then that’s national vanity bordering on hubris.

At the center of Michael Porter’s five forces for competition is rivalry. Economists measure rivalry by indicators of industry concentration. The concentration ratio indicates the percentage of market share held by the largest firms. When a few firms hold large market shares, the industry is concentrated, and borders on a monopoly. Less concentrated or fragmented markets are tacitly more competitive.

In the innovation industry, competition advantage is concentrated in the Silicon Valley. The global innovation space is imperfect, and the results aren’t always fair.

National dreams of building an innovation economy are not manifest destiny.

In the Square, dreaming big ideas is encouraged. It’s innovation’s reality that bites…  


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